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News from the IRS -Smaller refunds and other items of note
The cat is out of the bag. The news from the IRS is that this year taxpayers might receive smaller refunds this year than they have become accustomed to. There are a number of reasons for this including the child tax credit reduction, and the new withholding Form W-4 which results in taxpayers withholding less than in prior years. The new form does away with “allowances,” which is meant to reduce the form’s complexity and increase its transparency according to the IRS.
Othe News from the IRS
There have also been a number of tax law issues that will affect this tax season:
- The gift tax annual exclusion for 2023 increases to $17,000;
- Mortgage insurance (on Schedule A) is no longer deductible;
- The $300/$600 deduction for charitable contributions is now only permitted on Schedule A;
- The new Form 1099-k threshold of $600, which was delayed for a year, is now in effect. For transactions in 2023, there is a $600 threshold and no transaction limit.
- Proposed regulations for inherited IRAs include a 50% penalty for failure to withdraw, with a 10-year time to liquidate; and this also applies to Roth IRAs.
Two other issues to ponder before April 18.
Ditch the Paper Checks: There is an agencywide priority within the U.S. Treasury to reduce the number of paper checks that are issued, with more than 11 million tax returns requiring paper checks. Electronic deposit is not only faster, but also safer for initially filed returns — paper checks are more likely to be manipulated or compromised. With direct deposit you won’t have uncashed checks sitting in tax refund envelopes. There are currently an astonishing 10 million Treasury checks that have not been cashed, a large portion of which are for under $50.
EITC awareness: The IRS estimates that four of five eligible taxpayers claim and receive the Earned Income Tax Credit. While 31 million tax returns with EITC requests resulted in $54 billion in refunds, 20% of those eligible for the credit don’t claim it, according to the IRS.